Author: David Crane

In 1973, the president of Ford testified against pollution-reducing catalytic converters on cars on the grounds that such a requirement risked “a complete shutdown of the US auto industry.”

Of course, no such shutdown occurred and pollution was greatly reduced. But 35 years later, Meg Whitman, a candidate for the Republican nomination for governor, is raising similar fears about California’s Global Warming Solutions Act, signed into law by Governor Schwarzenegger in 2006 (AB32). In doing so she betrays an apparent lack of understanding about how AB32 will be implemented, the opportunities arising from that implementation, and an indifference to the risks of suspending the law.

Ms. Whitman says that AB32’s implementation can only result in reduced economic growth, but as California demonstrated in the 1970’s when it launched its energy efficiency effort using performance standards, that does not have to be the outcome — provided we harness the power of capitalism and competition. Back then, refrigerator makers claimed performance standards would curtail consumer choice and raise prices, but instead, choices weren’t reduced, energy consumption per unit dropped 75%, and prices fell nearly 50%. In fact, relative to a 1974 model, energy savings have put $15 billion in Californians’ pockets.

This week, the board of the California Public Employee Retirement System (CalPERS), the largest pension fund in the country, will be asked to approve a “smoothing” proposal designed to provide short- term cash flow relief to local and state governments by deferring pension contributions.
If that sounds to you like a free lunch, you’re right. Such an offer is tempting to governments facing harsh budget troubles, but CalPERS should reject the proposal as at best imprudent and at worst dangerous to future generations.

From Enron to AIG, we have seen the consequences when complex financial engineering and mystifying terminology is employed to obscure simple truths. In AIG’s case, “credit default swaps” masked transactions that in reality were unregulated insurance contracts. In CalPERS’s case, what is unthreateningly framed as “smoothing” is in reality a negative amortization borrowing of the type that recently led so many homeowners down the garden path to foreclosure.

California is the richest state in the richest country in the world and we lead the world in entrepreneurship and innovation.

But when it comes to infrastructure, we are neither rich, entrepreneurial nor innovative.  States and countries with a fraction of our wealth provide their citizens with far superior infrastructure services. People elsewhere travel on more convenient and comfortable transportation systems, study in better school facilities, live behind more secure levees, drink from more secure water systems, and more. California’s environment, quality of life, workers, students and innovators all suffer as a result of our infrastructure deficit.